Engagement is a relatively new concept - an investor’s shareholding is used to persuade companies to improve their corporate behaviour and try to reduce risks to shareholder value. As a shareholder you are a part owner of a company and therefore have a voice that company management must listen to. You may want your fund manager to pressurise company management to ensure that child labour is not being used in production processes; or to ensure that they are minimising their air and water pollution. Large multinational companies are increasingly as powerful as governments and with that power comes a responsibility to protect the planet and its resources. We believe it is important that investors are responsible shareholders and hold companies accountable.
When our assessment indicates that a company’s approach to SEE issues could have an adverse impact on shareholder value, as shareholders we feel that it is our duty to try to reduce this risk. We highlight our assessment of the SEE risks to the company in bespoke meetings/conference calls and thereby promote best practice, if this ‘dialogue’ proves futile and the risk increases, as active managers we can sell our holding. From a SRI perspective we would only sell a stock as a last resort. Whilst Cazenove Capital’s impact on corporate decisions cannot be measured, we believe that our actions together with other investors have a material impact on companies.
